<PAGE> 1
VANGUARD/TRUSTEES'
EQUITY FUND-U.S. PORTFOLIO
Semiannual Report
June 30, 1997
[PHOTO]
[THE VANGUARD GROUP LOGO]
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[PHOTO]
THE VANGUARD GROUP: LINKING TRADITION AND INNOVATION
At Vanguard, we treasure our rich nautical heritage--even as we steer our
course toward the twenty-first century. Our Report cover reflects that blending
of tradition and innovation, of past, present, and future. The montage includes
a bronze medallion with a likeness of our namesake, HMS Vanguard (Lord Nelson's
flagship at The Battle of the Nile); a clock built circa 1816 in Scotland,
featuring a portrait of Nelson; and several views of our recently completed
campus, which is steeped in nautical imagery--from our buildings named after
Nelson's warships (Victory, Majestic, and Goliath are three shown), to our
artwork and ornamental compass rose.
CONTENTS
A Message To
Our Shareholders
1
The Markets
In Perspective
3
Report From
The Adviser
5
Performance
Summary
6
Financial
Statements
7
Trustees And
Officers
INSIDE BACK COVER
All comparative mutual fund data
are from Lipper Analytical Services, Inc.
or Morningstar unless otherwise noted.
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[PHOTO]
FELLOW SHAREHOLDER,
The stock market continued its amazing climb during the first half of 1997.
Vanguard/Trustees' Equity Fund-U.S. Portfolio achieved a return of +18.7%
during the first half of the year, a result that was satisfying not only on an
absolute basis, but also relative to the average general equity mutual fund, if
not to the Standard & Poor's 500 Composite Stock Price Index.
The following table compares the Portfolio's total return (capital change
plus reinvested dividends) for the six-month period with those of the average
general equity fund and the unmanaged Index.
The Portfolio's return is based on an increase in net asset value from
$37.08 per share on December 31, 1996, to $41.04 per share on June 30, 1997,
with the latter figure adjusted for a dividend of $0.22 per share paid from net
investment income and distributions totaling $2.44 per share from net realized
capital gains. Income distributions, formerly made quarterly, are now being
made semiannually.
<TABLE>
<CAPTION>
- ----------------------------------------------------------
TOTAL RETURN
SIX MONTHS ENDED
JUNE 30, 1997
- ----------------------------------------------------------
<S> <C>
Vanguard/Trustees' Equity Fund-
U.S. Portfolio +18.7%
- ----------------------------------------------------------
Average General Equity Fund +13.0%
- ----------------------------------------------------------
S&P 500 Index +20.6%
- ----------------------------------------------------------
</TABLE>
THE PERIOD IN REVIEW
A nearly perfect climate for common stocks--strong economic growth, rising
corporate profits, and decelerating inflation--prevailed during the six months
ended June 30. While the market's rising tide lifted all boats,
large-capitalization stocks rose the most. Even so, the advance was not
without incident: The S&P 500 Index endured a decline of nearly -10% during the
seven weeks following February 18, when the Index reached a record high.
However, that drop was quickly aborted, and by early May the market was setting
record highs almost weekly.
Jitters about interest rates and inflation were the apparent causes of the
brief slide. Although the Federal Reserve Board raised its target for the
federal funds rate by a quarter-point to 5.50% on March 25, short-term interest
rates ended the period where they began it (5.17% for 90-day U.S. Treasury
bills). Longer-term rates were up only slightly on balance during the first
half of the year (by amounts ranging from 0.08% on 10-year Treasury bonds to
0.21% on 3-year Treasury notes). The stock market's strong rebound in the
second quarter stemmed from a combination of factors, including strong
corporate earnings reports, a lessening of inflation fears, and an easing in
interest rates. Whatever their causes, the price fluctuations served as a clear
reminder of the volatility that is very much a part of investing in stocks.
Our Portfolio gave a decent account of itself during the period. While our
return trailed the +20.6% return of the S&P 500 Index by 1.9 percentage points,
we regard that as a satisfactory result in light of the market's extreme tilt
toward the largest-capitalization stocks.
One indication of the bias toward large-cap stocks during the period is
that the return on the S&P 500 Index was nearly double the +10.6% return on the
rest of the stock
1
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market (as represented by the Wilshire 4500 Equity Index). Even within the S&P
500 Index there was a powerful bias toward big stocks and against smaller
stocks: The 100 largest stocks in the Index returned +23.4% while the 400
others provided a return of +15.2%. Thus, part of our shortfall versus the
Index was due to the fact that the average market capitalization of the
Portfolio's holdings ($25.8 billion) was smaller than that of the S&P 500 Index
($32.9 billion). Most of the rest of the shortfall can be traced to our
holdings of health-care stocks. Although these issues earned about +23% for the
Portfolio during the half-year, they trailed the +31% return on health-care
stocks in the Index.
The Portfolio enjoyed a substantial edge of 5.7 percentage points over the
average competing fund during the six months. Ironically, this was due in part
to the market's bias toward large stocks, which hurt our performance relative
to the Index. Many funds in the general equity category invest more heavily
than our Portfolio does in mid- and small-cap stocks and were thus at a
disadvantage in the first half of this year. Also, operating expenses--which to
one degree or another reduce returns delivered by all mutual funds--are
considerably lower for the Portfolio than for most competing funds (our
expenses amount to about 0.50% of average net assets versus roughly 1.40% for
the average general equity fund).
IN SUMMARY
The extraordinary bull market for U.S. stocks that began almost 15 years ago
has amply demonstrated the rewards of long-term investing. Risk, the
inseparable companion of reward, may not be so apparent after such a period.
Yet investors disregard risk at their peril. So we hope that the sizable,
sudden fluctuations in the stock market during the first half of 1997
reinforced two key messages that we have repeatedly stressed in these Reports
to you.
The first message, of course, concerns the importance of holding a
balanced portfolio of stock funds, bond funds, and money market funds in
proportions appropriate to your financial situation, tolerance for risk, and
investment objectives. By making it easier to ride out episodes of market
volatility, a balanced portfolio helps investors to adhere to our second
message: Always "stay the course" toward your long-term investment goals.
/s/ JOHN C. BOGLE /s/ JOHN J. BRENNAN
John C. Bogle John J. Brennan
Chairman of the Board President
July 11, 1997
2
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[PHOTO]
THE MARKETS IN PERSPECTIVE
SIX MONTHS ENDED JUNE 30, 1997
U.S. EQUITY MARKETS
As the economy continued to grow while the rate of inflation did not, a robust
market provided solid gains to investors in U.S. common stocks during the
first half of 1997. The best performers were primarily larger-capitalization
issues, although the small-company indexes exhibited some strength in the final
two months of the period. Over the half-year, the Standard & Poor's 500
Composite Stock Price Index gained 20.6%, fueled by a 10.8% boost since the end
of April. Reflecting the gains among smaller companies, the Russell 2000 Index
posted a 10.2% increase for the six-month period, driven by an 11.1% jump in
May and a 4.3% rise in June. It was particularly noteworthy that the recent
small-cap gains were led by small growth stocks, the worst segment of the U.S.
market during the past 12 months. This group has surged 17.6% since the end of
March, although at the half-year's end it still lagged the S&P 500 Index by a
sizable margin (5.2% versus 20.6%).
Stocks benefited from the continued strength of corporate earnings, which
rose some 15% during the past year, and from a widespread confidence reflected
in increased price/earnings ratios. The strength in earnings, the expectation
that income will continue to increase at an attractive pace, and the further
conviction that inflation is not a problem helped stocks to continue to produce
solid gains in the fiscal period. What's more, earnings have shown not only
good strength but remarkable consistency in beating the consensus forecasts of
Wall Street analysts.
<TABLE>
<CAPTION>
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TOTAL RETURNS
PERIODS ENDED JUNE 30, 1997
-----------------------------
6 MONTHS 1 YEAR 5 YEARS*
- ----------------------------------------------------------
<S> <C> <C> <C>
EQUITY
S&P 500 Index 20.6% 34.7% 19.8%
Russell 2000 Index 10.2 16.3 17.9
MSCI EAFE Index 11.4 13.2 13.2
- ----------------------------------------------------------
FIXED-INCOME
Lehman Aggregate Bond Index 3.1% 8.2% 7.1%
Lehman 10-Year Municipal
Bond Index 3.3 8.3 7.4
Salomon Brothers Three-Month
U.S. Treasury Bill Index 2.6 5.3 4.5
- ----------------------------------------------------------
OTHER
Consumer Price Index 1.1% 2.3% 2.7%
- ----------------------------------------------------------
</TABLE>
*Average annual.
The strongest gains in the S&P 500 Index during the past six months came
from the health-care sector (up 31.4%) and the consumer-staples sector (up
23.9%). By contrast, numerous uncertainties for utilities caused the issues in
that sector to lag the broad market, although, on an absolute basis, their 8.2%
return over six months is quite good.
U.S. FIXED-INCOME MARKETS
The modest rise in interest rates during the past six months reflects the
economy's underlying momentum. The 10-year U.S. Treasury's yield increased from
6.42% at the end of December to 6.97% by the middle of April. In the following
weeks, economic reports indicated a slowing in economic growth and further
reduced fears of an increase in inflation. This news helped interest rates fall
to 6.50% by the end of June.
3
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Fueled by robust consumer spending, the U.S. economy expanded at a
remarkable 5.8% rate in the first three months of 1997. Reflecting the vibrant
economy, the nation's unemployment rate stood at 5.0% in June. Strong economic
growth and tight labor markets have often led to rising inflation because of
increased demand for goods and services. With this in mind, the Federal Reserve
raised its federal funds interest rate target by 0.25% on March 25 in a
"preemptive" strike against mounting inflationary pressures. Observed price
increases have been subdued in recent months, however. Wholesale prices have
fallen in each of the first six months of 1997, and so far this year consumer
prices have risen at a slower pace than last year.
With interest rates very close to year-end levels, bond investors have
fared reasonably well during the past six months, as illustrated by the 3.1%
return of the Lehman Brothers Aggregate Bond Index. Investors who favored
shorter-maturity and lower-quality issues achieved somewhat better returns.
Mortgage-backed securities continued to perform well because refinancing
activity has been reduced to historically low levels as interest rates have
risen. Municipal issues also tended to perform better than their taxable
counterparts.
INTERNATIONAL EQUITY MARKETS
International investors received fairly good returns over the past six months.
As measured by the broad Morgan Stanley Capital International Europe,
Australasia, Far East Index, foreign markets gained 11.4%.
The period saw two major developments. First, the Japanese stock market
moved sharply higher in the spring, returning 11.1% in May and 7.5% in June to
U.S. investors. Better tone in the economy, plus strong earnings reported by
export-oriented companies benefiting from the weak yen, gave Japan a
long-awaited boost. For the six months, the Japanese market is up 9.2%. The
competitive benefits of a weak currency relative to the dollar extended to
Germany, where the export-driven capital goods and chemical manufacturers
gained; overall, the German market rose 17.0% during the six-month period.
Arguably the biggest news came from the French elections at the end of
May. The new government is considered to be less friendly toward the austerity
measures needed to meet the eligibility requirements for the European Monetary
Union (EMU) in 1999. The French elections also had a broad impact across the
continent. Although most investors appear to agree that the elections won't
jeopardize the continent's move toward the EMU, the timing and intensity of the
fiscal measures are now less certain. For the six months, Europe gained 24.8%
in local currencies, which a strong dollar trimmed to 14.4% for U.S. investors.
4
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[PHOTO]
REPORT FROM THE ADVISER
The first half of 1997 continued the trends of last year, as your Portfolio
outperformed both the broad stock market indexes, such as the Wilshire 5000
Equity Index, and the average general equity fund, but lagged the Standard &
Poor's 500 Composite Stock Price Index. The largest stocks continued to account
for a disproportionate amount of the Index's returns, which meant that our mid-
to smaller-capitalization equities underperformed relative to the Index. Having
said that, your Portfolio is having a solid year, with its return exceeding
those of the average individual stock and the average general equity fund.
Your Portfolio is invested in both "growth" stocks and "value" stocks. The
growth component has a larger market capitalization than the value component
due to our current emphasis on stability of earnings and financial quality.
However, your Portfolio does have some smaller stocks selected for their growth
momentum. We continue to feel that the faster growth rates of these stocks,
coupled with their lower valuation multiples, will reward our Portfolio in the
near future. What we will not own in the growth segment of the market are any
firms with disappointing earnings. In this market, when earnings
disappointments are punished by severe price declines, what you don't own is
probably more important than what you do own.
Our value component did better than the value stock indexes due to our
overweighting in the consumer sector and in capital equipment stocks and our
underweighting of the utility sector. We do not foresee many changes in your
Portfolio's value component, except for the auto industry, in which we will be
underweighted versus the market indexes. The value stocks that we want to own
in this investment environment not only have reasonable price/earnings
multiples, but also have some sort of earnings visibility. The market continues
to reward good earnings and we want your Portfolio situated accordingly.
Although 1997 has been kind to your Portfolio relative to our peers and
the extended market indexes, we still have our work cut out for us in our quest
to provide higher returns than those of the S&P 500 Index. We believe that your
Portfolio as situated will benefit from holdings of high-quality companies with
stable earnings growth. Such stocks should have their multiples expand at the
expense of speculative growth names. In addition, we should benefit if we
succeed in avoiding earnings disappointments in the value component.
We are extremely optimistic about the Portfolio's future investment
performance and appreciate your continued confidence.
John J. Geewax, General Partner
Geewax, Terker & Company
July 10, 1997
INVESTMENT PHILOSOPHY
The Portfolio reflects a belief that superior long-term investment results can
be achieved by investing in a diversified group of stocks, of which 50% to 70%
are selected for their exceptional "value" characteristics and the balance for
their above-average prospects for growth. In addition, stocks are analyzed
before selection to eliminate those that are illiquid, of dubious financial
strength, or subject to negative investor sentiment.
5
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PERFORMANCE SUMMARY
All of the data on this page represent past performance, which cannot be used
to predict future returns that may be achieved by the Portfolio. Note, too,
that both share price and return can fluctuate widely so that an investment in
the Portfolio could lose money.
<TABLE>
<CAPTION>
TRUSTEES' EQUITY FUND-U.S. PORTFOLIO
TOTAL INVESTMENT RETURNS: JANUARY 31, 1980-JUNE 30, 1997
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TRUSTEES' EQUITY FUND-U.S. PORTFOLIO S&P 500
FISCAL CAPITAL INCOME TOTAL TOTAL
YEAR RETURN RETURN RETURN RETURN
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
1980 11.2% 6.2% 17.4% 24.6%
1981 3.6 6.7 10.3 -4.9
1982 17.4 7.4 24.8 21.5
1983 23.9 5.2 29.1 22.5
1984 -7.4 4.5 -2.9 6.3
1985 15.4 5.1 20.5 31.8
1986 11.3 4.0 15.3 18.7
1987 -0.3 2.0 1.7 5.3
1988 20.1 4.5 24.6 16.6
1989 13.8 3.4 17.2 31.7
1990 -12.4 4.1 -8.3 -3.1
1991 23.1 3.5 26.6 30.5
1992 3.9 2.6 6.5 7.6
1993 15.6 1.6 17.2 10.1
1994 -5.0 1.1 -3.9 1.3
1995 30.9 2.3 33.2 37.6
1996 19.3 2.0 21.3 23.0
1997* 18.1 0.6 18.7 20.6
- ---------------------------------------------------------
</TABLE>
*Six months ended June 30, 1997.
See Financial Highlights table on page 13 for dividend and capital gains
information for the past five years.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS: PERIODS ENDED JUNE 30, 1997
- --------------------------------------------------------------------------------------
10 YEARS
INCEPTION --------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Trustees' Equity Fund-
U.S. Portfolio 1/31/80 32.75% 18.83% 9.26% 2.60% 11.86%
- --------------------------------------------------------------------------------------
</TABLE>
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[PHOTO]
FINANCIAL STATEMENTS
JUNE 30, 1997 (unaudited)
STATEMENT OF NET ASSETS
This Statement provides a detailed list of the Portfolio's holdings, including
each security's market value on the last day of the reporting period.
Securities are grouped and subtotaled by asset type (common stocks, preferred
stocks, bonds, etc.) and by industry sector. Other assets are added to, and
liabilities are subtracted from, the value of Total Investments to calculate
the Portfolio's Net Assets. Finally, Net Assets are divided by the outstanding
shares of the Portfolio to arrive at its share price, or Net Asset Value (NAV)
Per Share.
At the end of the Statement of Net Assets, you will find a table displaying
the composition of the Portfolio's net assets on both a dollar and per-share
basis. Because all income and any realized gains must be distributed to
shareholders each year, the bulk of net assets consists of Paid in Capital
(money invested by shareholders). The amounts shown for Undistributed Net
Investment Income and Accumulated Net Realized Gains usually approximate the
sums the Portfolio had available to distribute to shareholders as income
dividends or capital gains as of the statement date. Any Accumulated Net
Realized Losses, and any cumulative excess of distributions over net income or
net realized gains, will appear as negative balances. Unrealized Appreciation
(Depreciation) is the difference between the market value of the Portfolio's
investments and their cost, and reflects the gains (losses) that would be
realized if the Portfolio were to sell all of its investments at their
statement-date values.
<TABLE>
<CAPTION>
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MARKET
TRUSTEES' EQUITY FUND- VALUE*
U.S. PORTFOLIO SHARES (000)
- -------------------------------------------------------------------------------------
COMMON STOCKS (97.8%)
- -------------------------------------------------------------------------------------
AUTO & TRANSPORTATION (3.7%)
<S> <C> <C>
- Autoliv, Inc. 3,000 $ 117
CSX Corp. 14,700 816
ComAir Holdings, Inc. 8,500 235
Dana Corp. 6,600 251
Ford Motor Co. 35,500 1,340
General Motors Corp. 26,400 1,470
- Halter Marine Group, Inc. 3,097 74
Harley-Davidson, Inc. 3,500 168
- Lear Corp. 16,000 710
Newport News Shipbuilding Inc. 740 14
Southwest Airlines Co. 8,600 223
Union Pacific Corp. 7,700 543
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5,961
-------------
CONSUMER DISCRETIONARY (10.7%)
American Greetings Corp. Class A 6,500 241
Applebee's International, Inc. 2,000 53
- Bed Bath & Beyond, Inc. 5,800 176
- Blyth Industries, Inc. 8,850 299
- CUC International, Inc. 47,100 1,216
Callaway Golf Co. 6,300 224
Cash America International Inc. 9,239 97
Central Newspapers Inc. 4,600 329
- Consolidated Stores, Inc. 5,093 177
- Costco Cos., Inc. 9,900 325
Cracker Barrel Old Country
Stores, Inc. 4,000 105
- Daisytek International Corp. 1,400 55
The Walt Disney Co. 24,900 1,998
Dollar General Corp. 16,500 619
Eastman Kodak Co. 7,100 545
Fastenal Co. 3,100 151
- Friedman's Inc. Class A 4,500 103
Gannett Co., Inc. 5,200 514
The Gap, Inc. 11,500 447
- GTech Holdings Corp. 2,000 64
Hasbro, Inc. 14,100 400
Home Depot, Inc. 10,000 689
Houghton Mifflin Co. 800 53
International Game Technology 8,900 158
Interpublic Group of Cos., Inc. 2,500 153
Intimate Brands, Inc. 7,800 164
Kellwood Co. 14,000 389
Knight-Ridder, Inc. 6,000 294
- Kohls Corp. 2,800 148
Leggett & Platt, Inc. 8,700 374
Liz Claiborne, Inc. 3,500 163
- Lone Star Steakhouse & Saloon 6,800 177
Lowe's Cos., Inc. 14,500 538
- MGM Grand Inc. 1,500 55
Marriott International 2,600 160
Mattel, Inc. 9,975 338
McDonald's Corp. 4,700 227
Newell Co. 6,400 254
- On Assignment, Inc. 1,200 46
Pittston Brink's Group 2,600 78
- Prime Hospitality Corp. 4,300 85
- Rural/Metro Corp. 3,000 87
E.W. Scripps Co. 1,000 42
Service Corp. International 6,500 214
- Staples, Inc. 20,400 472
- Stein Mart, Inc. 2,200 66
- Sylvan Learning Systems, Inc. 2,600 88
TJX Cos., Inc. 6,400 169
</TABLE>
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<TABLE>
<CAPTION>
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MARKET
TRUSTEES' EQUITY FUND- VALUE*
U.S. PORTFOLIO SHARES (000)
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<S> <C> <C>
- Toys R Us, Inc. 5,400 $ 189
Tribune Co. 17,100 822
Wal-Mart Stores, Inc. 51,300 1,735
Warnaco Group 7,400 236
Wendy's International, Inc. 9,700 252
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17,053
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CONSUMER STAPLES (11.2%)
CPC International, Inc. 8,100 748
The Coca-Cola Co. 31,000 2,092
Colgate-Palmolive Co. 20,800 1,357
Dimon Inc. 1,600 42
Gillette Co. 19,600 1,857
H.J. Heinz Co. 15,800 729
PepsiCo, Inc. 74,800 2,810
Philip Morris Cos., Inc. 61,800 2,742
Procter & Gamble Co. 18,200 2,571
The Quaker Oats Co. 5,500 247
RJR Nabisco Holdings Corp. 22,600 746
Richfood Holdings, Inc. 3,300 86
Sara Lee Corp. 11,700 487
SuperValu Inc. 2,300 79
Sysco Corp. 21,500 785
Universal Corp. 2,600 82
- Whole Foods Market, Inc. 4,200 139
Wrigley, (Wm.) Jr. Co. 2,400 161
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17,760
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FINANCIAL SERVICES (10.6%)
AFLAC, Inc. 3,800 180
American Express Co. 2,500 186
American International
Group, Inc. 8,500 1,270
Automatic Data Processing, Inc. 23,500 1,105
Bankers Trust New York Corp. 4,500 392
E.W. Blanch Holdings, Inc. 3,200 85
CMAC Investment Corp. 2,300 110
Capital One Financial Corp. 5,800 219
Chase Manhattan Corp. 3,764 365
Countrywide Credit Industries, Inc. 3,800 118
Donaldson, Lufkin & Jenrette, Inc. 3,400 203
A.G. Edwards & Sons, Inc. 9,800 419
Equitable of Iowa Co. 9,700 543
Everest Reinsurance Holdings, Inc. 1,400 55
Fannie Mae 20,200 881
Federal Home Loan
Mortgage Corp. 33,800 1,162
Fifth Third Bancorp 1,900 156
FINOVA Group, Inc. 2,100 161
First American Corp. (Tenn.) 4,000 153
First Data Corp. 17,300 760
- FIserv, Inc. 4,800 214
Franklin Resources Corp. 2,250 163
Frontier Insurance Group, Inc. 1,600 104
General Re Corp. 1,900 346
Jack Henry & Associates 2,100 51
Life Re Corp. 1,100 51
Loews Corp. 2,900 290
MGIC Investment Corp. 3,600 172
Marsh & McLennan Cos., Inc. 9,600 685
Morgan Stanley, Dean Witter,
Discover and Co. 16,060 692
NationsBank Corp. 25,800 1,664
Norwest Corp. 12,600 709
Paychex, Inc. 3,975 153
Penncorp Financial Group Inc. 1,400 54
Regions Financial Corp. 7,200 228
St. Paul Cos., Inc. 5,000 381
State Street Corp. 3,200 148
Student Loan Marketing Assn. 4,800 610
Summit Bancorp 4,300 216
- SunGard Data Systems, Inc. 1,700 79
Torchmark Corp. 5,000 356
Transatlantic Holdings, Inc. 3,200 318
Travelers Group Inc. 5,000 315
UNUM Corp. 7,600 319
Vesta Insurance Group, Inc. 1,900 82
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16,923
-------------
HEALTH CARE (13.4%)
Abbott Laboratories 28,100 1,876
- Agouron Pharmaceuticals, Inc. 1,200 97
- ALZA Corp. 5,100 148
- American HomePatient, Inc. 2,400 60
Amgen, Inc. 12,350 717
Bergen Brunswig Corp. Class A 13,750 383
Bristol-Myers Squibb Co. 13,500 1,094
- Chiron Corp. 5,200 108
Columbia/HCA Healthcare Corp. 28,700 1,128
DENTSPLY International Inc. 9,400 459
- EmCare Holdings Inc. 2,900 106
- Express Scripts 1,700 70
- Foundation Health Systems
Class A 9,440 286
- Genesis Health Ventures Inc. 2,500 84
- HEALTHSOUTH Corp. 20,600 514
- HealthCare COMPARE Corp. 5,100 267
- Healthcare & Retirement Corp. 3,600 120
Johnson & Johnson 31,700 2,041
- Lincare Holdings Inc. 13,300 572
McKesson Corp. 1,400 109
Merck & Co., Inc. 33,800 3,498
- MiniMed, Inc. 3,700 98
- Multicare Cos., Inc. 3,700 101
- Orthodontic Centers of
America, Inc. 5,800 106
- Oxford Health Plan 8,700 624
- Pediatrix Medical Group, Inc. 2,200 101
Pfizer, Inc. 22,800 2,725
- Phymatrix Corp. 5,800 89
- PhyCor, Inc. 2,600 89
- Prime Medical Services, Inc. 8,000 86
- Quorum Health Group, Inc. 24,400 866
- Henry Schein, Inc. 1,400 43
- Serologicals Corp. 3,000 66
- Sofamor Danek Group, Inc. 2,200 101
Stryker Corp. 2,100 74
- Sybron International Corp. 4,200 167
- Tecnol Medical Products Inc. 2,600 57
- Tenet Healthcare Corp. 3,645 108
- Total Renal Care Holdings, Inc. 7,000 281
United Healthcare Corp. 15,700 816
U.S. Surgical Corp. 8,100 302
</TABLE>
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<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
- -------------------------------------------------------------------------------------
<S> <C> <C>
- Vencor, Inc. 6,200 $ 262
- Watson Pharmaceuticals, Inc. 8,800 371
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21,270
-------------
INTEGRATED OILS (8.3%)
Amoco Corp. 17,200 1,495
Atlantic Richfield Co. 10,500 740
Chevron Corp. 16,000 1,183
Cross Timbers Oil Co. 1,500 29
Enron Corp. 15,000 612
Exxon Corp. 76,400 4,699
Mobil Corp. 24,600 1,719
Phillips Petroleum Co. 11,400 499
Texaco Inc. 16,300 1,773
Unocal Corp. 11,400 442
-------------
13,191
-------------
OTHER ENERGY (2.3%)
Baker Hughes, Inc. 2,600 101
- CalEnergy Co. 3,000 114
Devon Energy Corp. 2,800 103
- Diamond Offshore Drilling, Inc. 1,000 78
El Paso Natural Gas 337 19
- Global Marine, Inc. 13,200 307
Halliburton Co. 1,700 135
Lomak Petroleum, Inc. 4,200 75
Mapco Inc. 5,000 157
- Nabors Industries, Inc. 3,500 87
Noble Affiliates, Inc. 1,000 39
- Noble Drilling Corp. 2,400 54
- Reading & Bates Corp. 7,750 207
Schlumberger Ltd. 4,000 500
- SEACOR SMIT Inc. 500 26
- Smith International, Inc. 4,000 243
- Stone Energy Corp. 3,200 88
Tidewater, Inc. 7,800 343
Union Texas Petroleum
Holdings, Inc. 15,000 314
Vintage Petroleum, Inc. 3,000 92
- Weatherford Enterra Inc. 5,000 192
- Western Atlas, Inc. 5,700 418
-------------
3,692
-------------
MATERIALS & PROCESSING (7.4%)
- ABT Building Products Corp. 1,000 26
AK Steel Corp. 1,900 84
Air Products & Chemicals, Inc. 7,700 626
Allegheny Teledyne Inc. 7,200 194
AMCOL International Corp. 15,500 279
Belden Inc. 3,000 102
Bemis Co., Inc. 10,900 472
BetzDearborn Inc. 3,600 238
W.H. Brady Class A 12,100 350
Crompton & Knowles Corp. 4,000 89
Crown Cork & Seal Co., Inc. 5,300 283
E.I. du Pont de Nemours & Co. 26,200 1,647
Ecolab, Inc. 5,400 258
Engelhard Corp. 9,500 199
M.A. Hanna Co. 3,100 89
Illinois Tool Works, Inc. 12,200 609
- Jacobs Engineering Group Inc. 3,300 89
Lafarge Corp. 5,700 140
Lilly Industries Inc. Class A 4,400 89
Lubrizol Corp. 9,800 411
Martin Marietta Materials, Inc. 7,700 249
Masco Corp. 4,000 167
Morton International, Inc. 16,900 510
Nalco Chemical Co. 4,100 158
Nucor Corp. 5,300 299
Oregon Steel Mills, Inc. 8,400 167
Praxair, Inc. 7,000 392
RPM Inc. (Ohio) 25,300 465
Rohm & Haas Co. 5,500 495
A. Schulman Inc. 4,000 99
Sherwin-Williams Co. 23,800 735
- Shorewood Packaging 2,400 55
Sigma-Aldrich Corp. 17,700 618
Tyco International Ltd. 3,506 244
- UCAR International, Inc. 4,700 215
Valspar Corp. 3,100 92
Vulcan Materials Co. 6,500 510
-------------
11,744
-------------
PRODUCER DURABLES (4.4%)
- American Power Conversion Corp. 11,800 223
- Applied Materials, Inc. 10,800 764
Caterpillar, Inc. 3,100 333
Danaher Corp. 6,200 315
Diebold, Inc. 5,700 222
Dover Corp. 10,500 646
Emerson Electric Co. 5,600 308
W.W. Grainger, Inc. 2,700 211
HON Industries, Inc. 1,800 80
Hubbell Inc. Class B 6,500 286
- KLA-Tencor Corp. 1,000 49
- Lexmark International Group, Inc.
Class A 13,500 410
- MICROS Systems, Inc. 1,700 71
Molex, Inc. 8,625 315
Pitney Bowes, Inc. 12,100 841
Robbins & Myers, Inc. 2,800 92
Snap-On Inc. 2,000 79
- Solectron Corp. 7,900 553
- Teradyne, Inc. 2,500 98
- Thermo Instrument Systems, Inc. 11,100 340
- Thermedics Detection Inc. 630 7
- Thermedics, Inc. 6,300 99
Thomas & Betts Corp. 6,500 341
United Technologies Corp. 3,400 282
-------------
6,965
-------------
TECHNOLOGY (13.6%)
- Adaptec, Inc. 4,600 160
- Altera Corp. 6,500 328
- Anixter International Inc. 5,500 95
- Ascend Communications, Inc. 2,900 114
Avnet, Inc. 1,100 63
- Cisco Systems, Inc. 21,800 1,463
- Compaq Computer Corp. 10,700 1,062
Computer Associates
International, Inc. 11,300 629
- CompUSA, Inc. 8,000 172
- Computer Sciences Corp. 6,000 433
- DST Systems, Inc. 2,600 87
Dallas Semiconductor Corp. 2,500 98
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
MARKET
TRUSTEES' EQUITY FUND- VALUE*
U.S. PORTFOLIO SHARES (000)
- -------------------------------------------------------------------------------------
<S> <C> <C>
- EMC Corp. 5,900 $ 230
Hewlett-Packard Co. 18,300 1,025
Intel Corp. 14,800 2,095
International Business
Machines Corp. 34,200 3,084
Linear Technology Corp. 1,500 77
Lucent Technologies, Inc. 5,800 418
- McAfee Associates, Inc. 2,600 164
- Mercury Interactive Corp. 5,800 86
- Microsoft Corp. 29,600 3,743
- Micron Technology, Inc. 11,900 475
Motorola, Inc. 28,500 2,166
- Oracle Corp. 19,200 966
- Parametric Technology Corp. 6,000 255
- PeopleSoft Inc. 3,100 164
- SCI Systems, Inc. 11,200 714
- Sterling Commerce, Inc. 2,300 76
- Tellabs, Inc. 3,600 201
Texas Instruments, Inc. 4,000 336
- 3 Com Corp. 12,650 568
-------------
21,547
-------------
UTILITIES (6.0%)
American Electric Power Co., Inc. 1,500 63
American Water Works Co., Inc. 6,900 147
Ameritech Corp. 13,700 931
Aquila Gas Pipeline Corp. 2,400 33
Baltimore Gas & Electric Co. 6,400 171
Bell Atlantic Corp. 18,100 1,373
Brooklyn Union Gas Co. 2,700 77
- Chancellor Broadcasting Co.
Class A 2,600 104
DPL, Inc. 8,900 219
Dominion Resources, Inc. 7,300 267
Duke Energy Corp. 8,200 393
FPL Group, Inc. 14,000 645
GTE Corp. 38,400 1,685
National Fuel Gas Co. 3,400 143
New England Electric System 4,100 152
NYNEX Corp. 6,000 346
SBC Communications Inc. 18,000 1,114
Southern Co. 22,900 501
Sprint Corp. 8,000 421
TECO Energy, Inc. 6,500 166
Texas Utilities Co. 9,000 310
UtiliCorp United, Inc. 4,900 143
Wisconsin Energy Corp. 7,500 186
-------------
9,590
-------------
OTHER (6.2%)
- Bell & Howell Co. 3,600 111
Brunswick Corp. 13,200 413
Carlisle Co., Inc. 2,800 98
Cooper Industries, Inc. 10,900 542
Dresser Industries, Inc. 8,100 302
General Electric Co. 98,100 6,413
Hillenbrand Industries, Inc. 6,300 299
Lancaster Colony Corp. 3,600 174
Minnesota Mining &
Manufacturing Co. 3,500 357
Standard and Poor's
Depositary Receipts 7,100 627
Tenneco, Inc. 3,900 176
- Thermo Electron Corp. 6,100 210
Trinity Industries, Inc. 5,400 171
-------------
9,893
-------------
- -------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $121,133) 155,589
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
(000)
- -------------------------------------------------------------------------------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT (2.4%)
- -------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
5.93%, 7/1/97
(COST $3,847) $3,847 3,847
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.2%)
(COST $124,980) 159,436
- -------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-0.2%)
- -------------------------------------------------------------------------------------
Other Assets--Notes C and F 833
Liabilities--Note F (1,228)
-------------
(395)
- -------------------------------------------------------------------------------------
NET ASSETS (100%)
- -------------------------------------------------------------------------------------
Applicable to 3,875,593 outstanding
shares of beneficial interest
(unlimited authorization) $159,041
=====================================================================================
NET ASSET VALUE PER SHARE $41.04
=====================================================================================
</TABLE>
* See Note A in Notes to Financial Statements.
- - Non-Income Producing Security.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
AT JUNE 30, 1997, NET ASSETS CONSISTED OF:
- -------------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
- -------------------------------------------------------------------------------------
<S> <C> <C>
Paid in Capital--Note D $113,845 $29.38
Overdistributed Net
Investment Income (11) --
Accumulated Net
Realized Gains--Note D 10,751 2.77
Unrealized Appreciation--Note E 34,456 8.89
- -------------------------------------------------------------------------------------
NET ASSETS $159,041 $41.04
=====================================================================================
</TABLE>
10
<PAGE> 13
STATEMENT OF OPERATIONS
This Statement shows dividend and interest income earned by the Portfolio
during the reporting period, and details the operating expenses charged to the
Portfolio. These expenses directly reduce the amount of investment income
available to pay to shareholders as dividends. This Statement also shows any
Net Gain (Loss) realized on the sale of investments, and the increase or
decrease in the Unrealized Appreciation (Depreciation) on investments during
the period.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
TRUSTEES' EQUITY FUND-U.S. PORTFOLIO
SIX MONTHS ENDED JUNE 30, 1997
(000)
- -------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
INCOME
Dividends $ 1,172
Interest 89
-------------
Total Income 1,261
-------------
EXPENSES
Investment Advisory Fees--Note B
Basic Fee 290
Performance Adjustment (134)
The Vanguard Group--Note C
Management and Administrative 190
Marketing and Distribution 15
Custodian Fees 18
Auditing Fees 4
Shareholders' Reports 5
-------------
Total Expenses 388
- -------------------------------------------------------------------------------------
NET INVESTMENT INCOME 873
- -------------------------------------------------------------------------------------
REALIZED NET GAIN ON INVESTMENT SECURITIES SOLD 17,287
- -------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES 7,891
- -------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $26,051
=====================================================================================
</TABLE>
11
<PAGE> 14
STATEMENT OF CHANGES IN NET ASSETS
This Statement shows how the Portfolio's total net assets changed during the
two most recent reporting periods. The Operations section summarizes
information that is detailed in the Statement of Operations. The amounts shown
as Distributions to shareholders from the Portfolio's net income and capital
gains may not match the amounts shown in the Operations section, because
distributions are determined on a tax basis and may be made in a period
different from the one in which the income was earned or the gains were
realized on the financial statements. The Capital Share Transactions section
shows the amount shareholders invested in the Portfolio, either by purchasing
shares or by reinvesting distributions, as well as the amounts redeemed. The
corresponding numbers of Shares Issued and Redeemed are shown at the end of the
Statement.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
TRUSTEES' EQUITY FUND-
U.S. PORTFOLIO
---------------------------
SIX MONTHS YEAR
ENDED ENDED
JUN. 30, 1997 DEC. 31, 1996
(000) (000)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net Investment Income $ 873 $ 2,434
Realized Net Gain 17,287 27,920
Change in Unrealized Appreciation (Depreciation) 7,891 (2,268)
---------------------------
Net Increase in Net Assets Resulting from Operations 26,051 28,086
---------------------------
DISTRIBUTIONS
Net Investment Income (851) (2,491)
Realized Capital Gain (8,759) (25,106)
---------------------------
Total Distributions (9,610) (27,597)
---------------------------
CAPITAL SHARE TRANSACTIONS(1)
Issued 17,651 19,717
Issued in Lieu of Cash Distributions 9,109 26,307
Redeemed (41,848) (26,280)
---------------------------
Net Increase (Decrease) from Capital Share Transactions (15,088) 19,744
- -------------------------------------------------------------------------------------------
Total Increase 1,353 20,233
- -------------------------------------------------------------------------------------------
NET ASSETS
Beginning of Period 157,688 137,455
---------------------------
End of Period $159,041 $157,688
===========================================================================================
(1)Shares Issued (Redeemed)
Issued 457 511
Issued in Lieu of Cash Distributions 248 713
Redeemed (1,082) (686)
---------------------------
Net Increase (Decrease) in Shares Outstanding (377) 538
===========================================================================================
</TABLE>
12
<PAGE> 15
FINANCIAL HIGHLIGHTS
This table summarizes the Portfolio's investment results and distributions to
shareholders on a per-share basis. It also presents the Portfolio's Total
Return and shows net investment income and expenses as percentages of average
net assets. These data will help you assess: the variability of the Portfolio's
net income and total returns from year to year; the relative contributions of
net income and capital gains to the Portfolio's total return; how much it costs
to operate the Portfolio; and the extent to which the Portfolio tends to
distribute capital gains.
The table also shows the Portfolio Turnover Rate, a measure of trading
activity. A turnover rate of 100% means that the average security is held in
the Portfolio for one year. Finally, the table lists the Portfolio's Average
Commission Rate Paid, a disclosure required by the SEC beginning in 1996. This
rate is calculated by dividing total commissions paid on portfolio securities
by the total number of shares purchased and sold on which commissions were
charged.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
TRUSTEES' EQUITY FUND-U.S. PORTFOLIO
YEAR ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING SIX MONTHS ENDED -------------------------------------------------------------
THROUGHOUT EACH PERIOD JUNE 30, 1997 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $37.08 $37.01 $29.09 $30.65 $28.43 $28.20
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .23 .65 .62 .34 .43 .68
Net Realized and Unrealized Gain (Loss)
on Investments 6.39 6.87 8.96 (1.53) 4.38 1.08
------------------------------------------------------------------------
Total from Investment Operations 6.62 7.52 9.58 (1.19) 4.81 1.76
------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.22) (.67) (.61) (.34) (.43) (.67)
Distributions from Realized Capital Gains (2.44) (6.78) (1.05) (.03) (2.16) (.86)
------------------------------------------------------------------------
Total Distributions (2.66) (7.45) (1.66) (.37) (2.59) (1.53)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $41.04 $37.08 $37.01 $29.09 $30.65 $28.43
========================================================================================================================
TOTAL RETURN 18.73% 21.30% 33.21% -3.91% 17.24% 6.45%
========================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $159 $158 $137 $113 $119 $68
Ratio of Total Expenses to
Average Net Assets 0.53%* 0.49% 0.56% 0.73% 0.90% 0.65%
Ratio of Net Investment Income to
Average Net Assets 1.20%* 1.68% 1.79% 1.14% 1.43% 2.33%
Portfolio Turnover Rate 78%* 114% 77% 151% 139% 209%
Average Commission Rate Paid $.0527 $.0534 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annualized.
13
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
Vanguard/Trustees' Equity Fund-U.S. Portfolio is registered under the
Investment Company Act of 1940 as a diversified open-end investment company, or
mutual fund.
A. The following significant accounting policies conform to generally accepted
accounting principles for mutual funds. The Portfolio consistently follows such
policies in preparing its financial statements.
1. SECURITY VALUATION: Securities listed on an exchange are valued at the
latest quoted sales prices as of the close of trading on the New York Stock
Exchange (generally 4:00 p.m. Eastern time) on the valuation date; such
securities not traded on the valuation date are valued at the mean of the
latest quoted bid and asked prices. Securities not listed on an exchange are
valued at the latest quoted bid prices. Temporary cash investments are valued
at cost, which approximates market value.
2. FEDERAL INCOME TAXES: The Portfolio intends to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for federal income taxes is required in the financial
statements.
3. REPURCHASE AGREEMENTS: The Portfolio, along with other members of The
Vanguard Group, transfers uninvested cash balances to a Pooled Cash Account,
which is invested in repurchase agreements secured by U.S. government
securities. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal; however, in the event of default or bankruptcy by the other
party to the agreement, retention of the collateral may be subject to legal
proceedings.
4. DISTRIBUTIONS: Distributions to shareholders are recorded on the
ex-dividend date.
5. OTHER: Dividend income is recorded on the ex-dividend date. Security
transactions are accounted for on the date securities are bought or sold. Costs
used to determine realized gains (losses) on the sale of investment securities
are those of the specific securities sold.
B. Geewax, Terker & Company provides investment advisory services to the
Portfolio for a fee calculated at an annual percentage rate of average net
assets. The basic fee is subject to quarterly adjustments based on performance
relative to the S&P 500 Index. For the six months ended June 30, 1997, the
advisory fee represented an effective annual basic rate of 0.40% of the
Portfolio's average net assets before a decrease of $134,000 (an annual rate of
0.18%) based on performance.
C. The Vanguard Group furnishes at cost corporate management, administrative,
marketing, and distribution services. The costs of such services are allocated
to the Portfolio under methods approved by the board of trustees. At June 30,
1997, the Portfolio had contributed capital of $12,000 to Vanguard (included in
Other Assets), representing 0.1% of Vanguard's capitalization. The Portfolio's
trustees and officers are also directors and officers of Vanguard.
D. During the six months ended June 30, 1997, the Portfolio purchased
$55,841,000 of investment securities and sold $81,617,000 of investment
securities, other than temporary cash investments.
During the six months ended June 30, 1997, the Portfolio realized
$6,515,000 of net capital gains resulting from in-kind redemptions--in which
shareholders exchanged Portfolio shares for securities held by the Portfolio
rather than for cash. Because such gains are not taxable to the Portfolio, and
are not distributed to shareholders, they have been reclassified from
accumulated net realized gains to paid in capital.
E. At June 30, 1997, net unrealized appreciation of investment securities for
financial reporting and federal income tax purposes was $34,456,000, consisting
of unrealized gains of $35,226,000
14
<PAGE> 17
on securities that had risen in value since their purchase and $770,000 in
unrealized losses on securities that had fallen in value since their purchase.
F. The market value of securities on loan to broker/dealers at June 30, 1997,
was $472,000, for which the Portfolio held cash collateral of $490,000.
15
<PAGE> 18
TRUSTEES AND OFFICERS
JOHN C. BOGLE, Chairman of the Board and Director of The Vanguard Group, Inc.
and of each of the investment companies in The Vanguard Group.
JOHN J. BRENNAN, President, Chief Executive Officer, and Director of The
Vanguard Group, Inc. and of each of the investment companies in The
Vanguard Group.
ROBERT E. CAWTHORN, Chairman Emeritus and Director of Rhone-Poulenc Rorer,
Inc.; Managing Director of Global Health Care Partners/DLJ Merchant
Banking Partners; Director of Sun Company, Inc. and Westinghouse
Electric Corp.
BARBARA BARNES HAUPTFUHRER, Director of The Great Atlantic and Pacific Tea Co.,
Ikon Business Solutions, Inc., Raytheon Co., Knight-Ridder, Inc., and
Massa-chusetts Mutual Life Insurance Co.; Trustee Emerita of Wellesley
College.
BRUCE K. MACLAURY, President Emeritus of The Brookings Institution; Director of
American Express Bank Ltd., The St. Paul Companies, Inc., and National
Steel Corp.
BURTON G. MALKIEL, Chemical Bank Chairman's Professor of Economics, Princeton
University; Director of Prudential Insurance Co. of America, Amdahl
Corp., Baker Fentress & Co., The Jeffrey Co., and Southern New England
Communications Co.
ALFRED M. RANKIN, JR., Chairman, President, and Chief Executive Officer of
NACCO Industries, Inc.; Director of NACCO Industries, The BFGoodrich
Co., and The Standard Products Co.
JOHN C. SAWHILL, President and Chief Executive Officer of The Nature
Conservancy; formerly, Director and Senior Partner of McKinsey & Co.
and President of New York University; Director of Pacific Gas and
Electric Co., Procter & Gamble Co., and NACCO Industries.
JAMES O. WELCH, JR., Retired Chairman of Nabisco Brands, Inc.; retired Vice
Chairman and Director of RJR Nabisco; Director of TECO Energy, Inc.
and Kmart Corp.
J. LAWRENCE WILSON, Chairman and Chief Executive Officer of Rohm & Haas Co.;
Director of Cummins Engine Co.; Trustee of Vanderbilt University.
OTHER FUND OFFICERS
RAYMOND J. KLAPINSKY, Secretary; Senior Vice President and Secretary of The
Vanguard Group, Inc.; Secretary of each of the investment companies
in The Vanguard Group.
RICHARD F. HYLAND, Treasurer; Principal of The Vanguard Group, Inc.; Treasurer
of each of the investment companies in The Vanguard Group.
KAREN E. WEST, Controller; Principal of The Vanguard Group, Inc.; Controller
of each of the investment companies in The Vanguard Group.
OTHER VANGUARD OFFICERS
ROBERT A. DISTEFANO, Senior Vice President, Information Technology.
JAMES H. GATELY, Senior Vice President,
Individual Investor Group.
IAN A. MACKINNON, Senior Vice President,
Fixed Income Group.
F. WILLIAM MCNABB III, Senior Vice President, Institutional Investor Group.
RALPH K. PACKARD, Senior Vice President and
Chief Financial Officer.
[THE VANGUARD GROUP LOGO]
Please send your comments to us at:
Post Office Box 2600, Valley Forge, Pennsylvania 19482
Fund Information: 1-800-662-7447
Individual Account Services: 1-800-662-2739
Institutional Investor Services: 1-800-523-1036
http://www.vanguard.com [email protected]
All Vanguard funds are offered by prospectus only. Prospectuses contain more
complete information on advisory fees, distribution charges, and other expenses
and should be read carefully before investing or sending money. Prospectuses
may be obtained directly from The Vanguard Group.
(C) 1997 Vanguard Marketing Corporation, Distributor
<PAGE> 19
[PHOTO]
THE VANGUARD FAMILY OF FUNDS
EQUITY AND BALANCED FUNDS
GROWTH AND INCOME FUNDS
Vanguard/Windsor Fund
Vanguard/Windsor II
Vanguard Equity Income Fund
Vanguard Growth and Income Portfolio
Vanguard Selected Value Portfolio
Vanguard/Trustees' Equity-U.S. Portfolio
Vanguard Convertible Securities Fund
BALANCED FUNDS
Vanguard/Wellington Fund
Vanguard/Wellesley Income Fund
Vanguard STAR Portfolio
Vanguard Asset Allocation Fund
Vanguard LifeStrategy Portfolios
GROWTH FUNDS
Vanguard/Morgan Growth Fund
Vanguard/PRIMECAP Fund
Vanguard U.S. Growth Portfolio
AGGRESSIVE GROWTH FUNDS
Vanguard Explorer Fund
Vanguard Specialized Portfolios
Vanguard Horizon Fund
INTERNATIONAL FUNDS
Vanguard International Growth Portfolio
Vanguard International Value Portfolio
INDEX FUNDS
Vanguard Index Trust
Vanguard Tax-Managed Fund
Vanguard Balanced Index Fund
Vanguard Bond Index Fund
Vanguard International Equity Index Fund
Vanguard Total International Portfolio
FIXED-INCOME FUNDS
MONEY MARKET FUNDS
Vanguard Money Market Reserves
Vanguard Treasury Money Market Portfolio
Vanguard Admiral Funds
INCOME FUNDS
Vanguard Fixed Income Securities Fund
Vanguard Admiral Funds
Vanguard Preferred Stock Fund
TAX-EXEMPT MONEY MARKET FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax-Free Funds
(CA, NJ, OH, PA)
TAX-EXEMPT INCOME FUNDS
Vanguard Municipal Bond Fund
Vanguard State Tax-Free Funds
(CA, FL, NJ, NY, OH, PA)
Q252-6/97
